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We are 42 days away from the Fed's next policy setting meeting, and the market is more surely increasing the number of committee members making the first interest rate cuts of the year.
Currently, for each CME Group data, there is a 91% chance that FOMC will reduce its 25 basis points in September.
The Fed used to act at the Bank of England and the European Central Bank, but has recently been divided into policies.
The ECB has been cut twice in 2025 so far. First in March and again in June, we made our benchmark borrowing costs more than 2% lower than the US. The cuts in June marked the European Central Bank's eighth consecutive time. In July, the ECB held interest rates, citing concerns over uncertain trade policies.
The ECB cut its inflation forecast in June, with prices expected to rise by 1.6% in 2026. The 2025 headline forecast is 2% in line with the target, giving room to reduce additional charge reductions. Meanwhile, growth forecasts have declined slightly in response to high tariff rates on exports to the US.
The BOE issued cuts in May, holding interest rates in June, citing the conflict between Israel and Iran that increased oil prices. A BOE official reiterated, in Gov. Andrew Bailey's words, that interest rates are on a “gradual downward path.”
“The world is very unpredictable,” Bailey added.
Powell, the Fed Chair, agrees. Throughout 2025, he has emphasized the importance of monitoring economic data before adjusting policies.
When asked by reporters at the ECB's annual forum in July, Powell responded to whether the Fed had ever lowered the fees without tariffs.
“So I think it's correct. In effect, when we saw the scale of tariffs, we were put on hold and basically all US inflation forecasts rose substantially as a result of tariffs. We didn't overreact.
Last month, Powell told reporters that committee members “has not decided on September,” which was expected, but added that the central bank is focusing on risks of waiting too long, such as “including downside risks to the labour market.”
